Ghosts in the Criminal Machine - How a Drug Company Can Plead Guilty to Federal Fraud, Yet No One is Held Responsible

We have often discussed how leaders of health care organizations have become increasingly unaccountable for their actions.  A recent, slightly obscure story shows how a corporate admission of guilt to a felony can be used to prevent anyone, including anyone in corporate management, from being held responsible for that fraud.<br /><br /><b>Basics of the Settlement</b><br /><br />The case was that of ISTA Pharmaceuticals.  The basics appeared in brief wire service articles, like <a href="http://www.foxbusiness.com/industries/2013/05/24/bausch-lomb-ista-admits-to-kickbacks/">this one</a> from Rueters (via Fox News):<br /><br /><br /><blockquote class="tr_bq"><i>Ista Pharmaceuticals pleaded guilty on Friday to charges it used kickbacks and improper marketing to boost sales of a drug </i>meant to treat eye pain and agreed to<i> pay $33.5 million to settle criminal and civil liability</i>, the U.S. Department of Justice said.<br /><br /> The unit of eye care company Bausch & Lomb <i>pleaded guilty to conspiracy to offer kickbacks to induce physicians to prescribe Xibrom,</i> a drug meant to treat pain after cataract surgery, and <i>conspiracy to promote that drug for unapproved uses</i>, including after Lasik and glaucoma surgeries.<br /><br /> Ista agreed as part of a criminal settlement to a $16.63 million fine and an $1.85 million asset forfeiture. It also agreed to a $15 million civil settlement to resolve allegations that its marketing of Xibrom caused false claims to be submitted to government health care programs.</blockquote><br /><b>Kickbacks Disguised as Honoraria and Consulting Fees </b><br /><br />Note that unlike many such legal settlements involving large health care organizations, this one involved admissions of guilt to felonious criminal offenses.  The severity of the charges apparently arose out of the egregious conduct of company executives.  Colorful details were <a href="http://www.buffalonews.com/apps/pbcs.dll/article?AID=/20130524/CITYANDREGION/130529545/1005">supplied</a> by the Buffalo (NY) News:<br /><br /><blockquote class="tr_bq">ISTA, which is based in California, <i>admitted using kickbacks to doctors and an illegal marketing campaign </i>as part of an elaborate scheme to increase its sales of Xibrom.<br /><br />The scheme, outlined in detail in newly released court papers, ranged from company-provided instruction sheets for doctors to continuing medical education programs to promote the drug.<br /><br />In many cases, <i>ISTA employees were told not to leave printed materials behind in doctors’ offices or to keep records of their meetings with doctors in order to avoid detection </i>by others.<br /><br />The company went so far as to <i>offer speaking engagements and consulting appearances to doctors in hopes that they might use Xibrom</i> for non-authorized treatments.<br /><br />Doctors can legally prescribe drugs for non-FDA approved treatments, but drugmakers are prohibited from promoting their products for those uses.<br /><br />'Essentially <i>they entered into consulting arrangements to induce physicians to prescribe their drug</i>,' said Jeffrey I. Steger, a lawyer in the Consumer Protection Branch of the U.S. Department of Justice.<br /><br />When [US District Judge Richard J] Arcara asked if money was the doctors’ motivation, Steger said yes.<br /><br />'Thousands of dollars,' he told the judge. </blockquote><br />So here we have a company admitting that it bribed doctors to prescribe its drug, and its techniques of administering bribes included paying the doctors honoraria to give talks, and paying the doctors as consultants.  As an aside, note that many defenders of "collaboration" among doctors and industry sign the praises of doctors "consulting" for industry, and often see nothing wrong with industry paying doctors for "educational" speeches.  Yet here is more evidence that such paid talks and consulting assignments may be nothing more than marketing, and at times are merely disguised bribery. <br /><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><b>An Apparently Tough Penalty</b></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">An unusual feature of this settlement was that (per Reuters):</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><blockquote class="tr_bq">As part of the settlement, <i>Ista will be barred from participating in Medicare and Medicaid,</i>...</blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div></div><br /><br />That would appear to be the death knell for the company, as reported by Reuters, <br /><br /><blockquote class="tr_bq">Bausch & Lomb, which is based in Rochester, New York, said it was pleased to settle the matter, which involved conduct between January 2006 and March 2011, and that it knew of the government probe well before it purchased Ista.<br /><br /> That purchase closed in June 2012 and Bausch and Lomb <i>plans to wind down the Ista corporate entity by year end.</i></blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /></div>So Bausch and Lomb bought a company that turned out to be valueless?  But wait,...  there's a trick. <br /><br />As <a href="http://www.fiercepharma.com/story/ista-excluded-medicare-335m-label-settlement/2013-05-28">detailed</a> in FiercePharma,<br /><br /><blockquote class="tr_bq"> ISTA will be barred from doing business with Medicare, Medicaid, et al, for 15 years. Luckily for Bausch + Lomb, however, it bought ISTA in June 2012,  late enough in the game to actually escape the ramifications of exclusion. <i>The exclusion won't begin until 6 months after the settlement date, giving Bausch + Lomb time to transfer ISTA's products out of that subsidiary and shift the drugs over to the Bausch + Lomb label.</i></blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /><b>A Crime Committed by... No One?</b></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">So Bausch and Lomb gets ISTA's drugs, and essentially can resolve the company's felony convictions by relatively small fines, and through management sleight of hand, can finesse ISTA's disbarment from federal programs..  This will occur despite admissions that someone within ISTA, presumably within ISTA management, perhaps high up in ISTA management, per FiercePharma, </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><blockquote class="tr_bq"><i>instructed reps to avoid leaving a paper trail of their off-label discussions with doctors. </i>Prosecutors had enough evidence of this to <i>persuade ISTA to plead guilty to a felony fraud charge.</i> 'These instructions were given in order to avoid having their conduct relating to unapproved new uses being detected by others, the Justice Department said. 'ISTA agreed that this conduct represented an intent to defraud under the law.'</blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br />So felony fraud was committed, but no person apparently committed it.  It was as if a ghost committed the crime.</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Not only was a crime committed, but apparently by nobody, the corporation within which the crime was committed also becomes obscure.  ISTA became responsible, but by being bought out by Bausch and Lomb, the more severe penalty directed against ISTA will be meaningless.  </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Should Bausch and Lomb be responsible?  Of course, they claim they should not.  As <a href="http://www.bloomberg.com/news/2013-05-24/bausch-lomb-unit-pays-33-5-million-in-misbranding-case.html">reporte</a>d by Bloomberg, </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><blockquote class="tr_bq"><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> Rochester, New York-based Bausch & Lomb said the actions occurred 'well before' it acquired Ista in 2012. </div></blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><blockquote><br />'Bausch & Lomb is committed to earning trust in everything that we do and is pleased to have resolved this pre-acquisition issue,' Bob Bailey, a Bausch & Lomb spokesman, said in a statement. </blockquote><br />In fact, The Hill<a href="http://thehill.com/blogs/regwatch/healthcare/301949-drug-company-pleads-guilty-to-felony-kickback-scheme-pays-335m"> reported</a> that the bad behavior took place from 2005 to 2010: <br /><br />But consider that while ISTA recently became part of Bausch and Lomb, since 2007, Bausch and Lomb has been wholly owned by private equity firm Warburg Pincus.  In fact, as we <a href="http://hcrenewal.blogspot.com/2009/06/was-private-equity-takeover-of-bausch.html">discussed</a> in in 2009, some people suspected that this maneuver would have allowed Baush and Lomb to settle multiple suits alleging that its products were faulty and dangerous out of the public eye.  So while ISTA is now really Bausch and Lomb is now really Warburg Pincus, no one in the management of ISTA, Bausch and Lomb, or Warburg Pincus apparently will be held responsible for criminal fraud and kickbacks to doctors, even though guilty pleas for these felonies have been made.  So somehow we have admissions that crimes were committed, crimes that compromised the integrity of doctors, and exposed patients to needless side effects, yet these crimes were apparently committed by ... nobody, by a ghost, and even the machine that ghost was in - was it ISTA, Bausch and Lomb, or Warburg Pincus? - becomes a mystery.  Where is Sherlock Holmes when we need him most?.<br /><br /><b>Summary</b><br /><br />This case thus becomes a really striking example of the impunity of health care corporate managers.  They can commit crimes, even felonies, yet the company, but no human beings, is held responsible.  But the company being a company, it cannot go to jail.  And through the magic of obfuscatory corporate take-overs, which company is guilty is not even apparent. <br /><br />As we have said ad infinitum, <br /><br /> We will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich. </div></div>

Ghosts in the Criminal Machine - How a Drug Company Can Plead Guilty to Federal Fraud, Yet No One is Held Responsible

We have often discussed how leaders of health care organizations have become increasingly unaccountable for their actions.  A recent, slight...

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In Michigan, Intentional Alteration of Medical Records is a Felony

I addressed the issue of alteration of electronic medical records and the dearth of truly meaningful penalties at posts such as:<br /><br /><blockquote>"<a href="http://hcrenewal.blogspot.com/2011/09/stroud-v-abington-memorial-hospital-is.html">Stroud v. Abington Memorial Hospital: Is This Why Chart Alteration Might Be Appealing?</a>",<br /><br />"<a href="http://hcrenewal.blogspot.com/2011/07/on-penalities-for-alteration-of.html">On Penalties for Alteration of Electronic Health Records</a>"</blockquote>and<br /><blockquote>"<a href="http://hcrenewal.blogspot.com/2011/09/sweet-death-that-wasnt-very-sweet-how_24.html">UPMC and the Sweet death that wasn't very sweet: How EMRs can detract from a clear narrative, and facilitate spoliation and obfuscation of evidence</a>."</blockquote><br />A commenter to the latter post led me to another blog where it was pointed out that in Michigan, intentional chart alteration by a healthcare provider <a style="font-weight: bold;" href="http://legislature.mi.gov/doc.aspx?mcl-750-492a">is a</a><span style="font-weight: bold;"><a href="http://legislature.mi.gov/doc.aspx?mcl-750-492a"> felony</a> </span><span>(a criminal act, not just a civil matter)</span><span>,</span><span style="font-weight: bold;"> and looks like it has been since the early 1930's. </span><span><br /><br />This would apply not just to paper records, but electronic as well, since the advent of HIT did not alter the essentials of medical record keeping:</span><br /><table border="0" cellpadding="0" cellspacing="0"><tbody><tr><td style="padding: 0in;"><span style="font-size:100%;"><br /></span></td></tr></tbody></table><blockquote><table border="0" cellpadding="0" cellspacing="0"><tbody><tr><td style="padding: 0in;"><p class="MsoNormal"><span style="font-size:100%;">Section 750.492a </span></p></td></tr><tr style="min-height: 22.5pt;"><td style="padding: 0in; min-height: 22.5pt;" valign="top"><span style="font-size:100%;"><br /></span></td></tr></tbody></table><p style="text-align: center;" class="MsoNormal"><span style="font-size:100%;"><b>THE MICHIGAN PENAL CODE (EXCERPT)</b></span></p><div style="text-align: center;"><span style="font-size:100%;"><b>Act 328 of 1931</b><br /></span></div><p class="MsoNormal"><span style="font-size:100%;"><br /><b>750.492a Placing misleading or inaccurate information in medical records or charts; alteration or destruction of medical records or charts; penalties; applicability of subsections (1) and (2); basis for civil action for damages not created.</b></span></p><p><span style="font-size:100%;">Sec. 492a.</span></p><p><span style="font-size:100%;">(1) Except as otherwise provided in subsection (3), a health care provider or other person, knowing that the information is misleading or inaccurate, shall not intentionally, willfully, or recklessly place or direct another to place in a patient's medical record or chart misleading or inaccurate information regarding the diagnosis, treatment, or cause of a patient's condition. A violation of this subsection is punishable as follows:</span></p><p><span style="font-size:100%;">(a) <b>A health care provider who intentionally or willfully violates this subsection is guilty of a felony.</b></span></p><p><span style="font-size:100%;">(b) A health care provider who recklessly violates this subsection is guilty of a misdemeanor, punishable by imprisonment for not more than 1 year, or a fine of not more than $1,000.00, or both.</span></p><p><span style="font-size:100%;">(c) A person other than a health care provider who intentionally or willfully violates this subsection is guilty of a misdemeanor, punishable by imprisonment for not more than 1 year, or a fine of not more than $1,000.00, or both.</span></p><p><span style="font-size:100%;">(d) A person other than a health care provider who recklessly violates this subsection is guilty of a misdemeanor.</span></p><p><span style="font-size:100%;">(2) Except as otherwise provided in subsection (3), a health care provider or other person shall not intentionally or willfully alter or destroy or direct another to alter or destroy a patient's medical records or charts for the purpose of concealing his or her responsibility for the patient's injury, sickness, or death. A health care provider who violates this subsection is guilty of a felony. A person other than a health care provider who violates this subsection is guilty of a misdemeanor punishable by imprisonment for not more than 1 year, or a fine of not more than $1,000.00, or both.</span></p><p><span style="font-size:100%;">(3) Subsections (1) and (2) do not apply to either of the following:</span></p><p><span style="font-size:100%;">(a) Destruction of a patient's original medical record or chart if all of the information contained in or on the medical record or chart is otherwise retained by means of mechanical or electronic recording, chemical reproduction, or other equivalent techniques that accurately reproduce all of the information contained in or on the original or by reproduction pursuant to the records media act that accurately reproduces all of the information contained in or on the original.</span></p><p><span style="font-size:100%;">(b) Supplementation of information or correction of an error in a patient's medical record or chart in a manner that reasonably discloses that the supplementation or correction was performed and that does not conceal or alter prior entries.</span></p><p><span style="font-size:100%;">(4) This section does not create or provide a basis for a civil cause of action for damages.</span></p><p><span style="font-size:100%;"><b>History:</b> Add. 1986, Act 184, Eff. Mar. 31, 1987 ;-- Am. 1992, Act 210, Imd. Eff. Oct. 5, 1992 </span></p><span style="font-size:100%;">© 2009 Legislative Council, State of Michigan</span></blockquote><br />I will be giving some attention to try to make this well-deserved penalty the Law of the Land for electronic medical records.<br /><br />-- SS

In Michigan, Intentional Alteration of Medical Records is a Felony

I addressed the issue of alteration of electronic medical records and the dearth of truly meaningful penalties at posts such as: " Stro...

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